U.S. firearms industry today: industry maintains encouraging growth during pivotal election year.

Author:Molde, Jade

Entering the second half of 2016, the U.S. firearms industry is well positioned to finish the year in a promising position. While not reaching the unprecedented heights of 2013, demand for firearms in the U.S. is strong--especially as consumers remain concerned about being responsible for their personal safety.

Sales are also being driven by the intensified anti-gun/anti-industry rhetoric from leftwing politicians, with November's general election near. In an era when other segments of the U.S. economy have grown sluggish or are increasingly reliant on outsourcing labor and resources to places outside the United States, the U.S. firearms industry, even through cyclical ups and downs, has maintained enviable growth.

In April, NSSF released the findings from the 2016 "Firearms and Ammunition Industry Economic Impact Report," which revealed the U.S. firearms industry's total economic impact increased from $19.1 billion in 2008 to $49.3 billion in 2015--an impressive 158 percent increase. In that same period, the industry also added around 120,000 full-time jobs (an increase of 73%) that pay an average annual wage of $50,180. Combining business and excise taxes, the U.S. firearms and ammunition industry generates more than $6.8 billion in taxes, a sizable footprint. In short: A healthy industry is an influential one.

Expansion To Gun-Friendly States

In a continued trend, several manufacturers have announced or opened relocated operations in gun-friendly states in 2016. In January, Remington Outdoor Co. and SIG SAUER announced they would expand manufacturing ammunition facilities in central Arkansas. These two expansions will add over 130 jobs to the region. New Hampshire-based SIG SAUER maintained Arkansas officials' "aggressive" negotiations and financial incentives influenced their decision to open an ammunition manufacturing facility in the Natural State.

First announced in Jan. 2014, Beretta USA Corp. opened its new 156,000-square-foot, state-of-the-art manufacturing and engineering center in Gallatin, Tenn., in April. This facility will support all of the company's U.S. manufacturing, creating over 200 jobs in North Central Tennessee. The company's corporate offices and executive support functions will remain in its Accokeek, Md., facility.

Many have labeled the South the "New Gun Valley," and these recent expansions have further substantiated this claim.

Financial Insights

In May, NICS conducted 928,532 (NSSF-adjusted) background checks, a 1.1 percent increase over May 2015. In an encouraging sign, 2016 year-to-date (Jan.-May) totals are higher compared to the corresponding dates in 2015, increasing from 5,427,494 to 6,206,763--a 14.3 percent increase.

Ruger's latest earnings report (Q1 2016) reveals the company posted $173.1 million in net sales, a 26.35 percent increase over the corresponding quarter in 2015. This substantial increase is attributed to several factors, including the rise in overall demand, new product introductions and Ruger's increased production capability and availability of products in demand, according to the report. After a period of declining sales, Ruger experienced a welcome recovery in 2015 that has strengthened into 2016.

"In 2015, demand returned to more normal seasonality. But nonetheless, 2015 was a recovery year in the cycle until very late in the year when we observed a significant spike in demand. This spike in demand was strongly correlated to the tragic terrorist activities in Paris and San Bernardino. Demand for firearms for self-defense and concealed carry increased dramatically, and that demand continued through the first quarter of 2016," said Mike Fifer, Ruger CEO, during Ruger's annual shareholders meeting in May.

New products, including the Ruger American Pistol, Precision Rifle, AR-556 MSR and LC9s pistol, represented $50.3 million (29%) of firearm sales in the first quarter of 2016.

According to Fifer, Q1 2016 earnings delivered Ruger's "second highest revenue we've ever enjoyed and the third highest earnings."

In March, Smith & Wesson reported its 2016 third quarter sales, which ended Jan. 31, increased 61.5 percent over the same quarter in 2015. Net sales totaled $210.8 million; firearms division net sales were $194.7 million, a 56.4 percent increase. Accessories division sales were $16.1 million, compared to $6.1 million for the comparable quarter last year (a period in which S&W acquired Battenfeld Technologies, and therefore reported only six weeks of accessories division sales).

"The combined strength of our firearms and accessories businesses delivered an exceptional performance, driven by healthy consumer demand across our growing portfolio of firearm and outdoor lifestyle offerings. During the third quarter, the adjusted NICS data reported a significant increase in growth versus the prior year, especially in handguns. In addition, our product sell-through at distribution was much stronger than we had anticipated," said James Debney, S&W Holding Corp. president and CEO.

S&W officials report the strong pull-through of the company's products "exceeded expectations," which resulted in less-than-planned Q4 internal inventories. To increase production rates in Q4, S&W plans to leverage its "flexible manufacturing model" and increase outsourcing efforts--which will help keep up with demand of products such as the M&P15 SPORT II and M&P SHIELD. The company estimates its fourth quarter of fiscal year 2016 revenue will be between $210 million and $215 million.

U.S. Firearm Production

In 2014, U.S. firearm production reflected the year's significant drop in sales and the struggle within the industry to define the "new normal." The number of firearms built in 2014 dropped to slightly below 2012 levels. This was in dramatic contrast to 2013, when, for the first time, U.S. manufacturers produced more than 10 million firearms in a single year (10,349,650).

According to the ATF's "2014 Annual Firearms Manufacturing and Export Report"--the latest data available--U.S. manufacturers made 8,692,461 firearms in 2014, a drop of 16 percent from 2014.

During 2014, U.S. firearm production declined in all categories, except revolvers. Hardest hit was...

To continue reading